Cryptocurrency is one of the most volatile assets in the financial market today. It is tricky to know what to expect from it as a trader. And although there is always a chance of making huge profits, some factors can jeopardize this hope.
So, as a crypto investor, you must understand how these influences impact crypto prices. Plus, most of these factors are highly correlated, contributing to a further amplified impact on the crypto prices.
Here are some of the critical factors to note.
- Government Regulations
Governments can affect the prices of cryptocurrencies in the market. As you would expect, it is up to the government to lay the ground rules for trading. They have the authority to decide on which cryptos can be traded and on which markets.
For instance, if a government chooses to ban Bitcoin casinos, which are popular today, a lot could go wrong. This will not only impact ordinary players but also affect professionals looking to explore Bitcoin casino bonuses for VIP players. Of course, the providers will also count vast loses.
But with clear and favorable regulations, online gambling stakeholders will have more confidence in the market, driving up demand and prices. On the other hand, restrictive regulations will spur uncertainty and potentially lead to price declines.
Generally, the government of the day is solely responsible for stabilizing or disrupting crypto market prices. So, checking on issues like taxation policies, advertising laws, and compliance costs is essential to harmonize crypto prices.
- Economic Changes
Changes in the economy can also impact the crypto market prices. The economic factors that move markets are unemployment, inflation, and interest rates. Inflation, for instance, can increase the prices of cryptocurrencies, making things hard for beginners working with low budgets.
This is because high inflation triggers people to use cryptocurrency as a hedge for their investments. They will buy crypto, wait for the market to improve, and resell them after the storm settles. And while investors use this as a chance to cushion themselves from the effects of inflation, it has long-term effects on the market prices.
- Market Uncertainty
Like in stock markets, the crypto market is also quite uncertain. The hype and fear around the crypto market may force traders to buy crypto at high prices in anticipation that the market will improve and they will profit by selling their crypto.
But then, other external factors like inflation affect the prices negatively. This triggers investors to rush into selling their crypto. The massive supply in the market causes a decline in crypto prices. Ultimately, it becomes tricky for investors to make the profits they anticipated when investing their hard-earned cash.
- Final Nail
The crypto market is one of the best options today for anyone looking to diversify their investment portfolio. But it comes with its share of challenges, including the dreaded volatility fueled by three major factors market uncertainty, government regulations, and inflation. Other factors worth noting include market manipulation, technological advancements, and cyber risks.